Are the U.S. Sanctions against Russia Really “Smart”?

On April 28, the United States imposed a new round of “smart” sanctions against Russian government officials and companies considered close to Vladimir Putin, including travel bans and asset freezes for seven Russian officials and asset freezes on seventeen Russian companies. According to Donald N. Jensen, resident fellow at the Center for Transatlantic Relations, though, these sanctions are still unlikely to work without being included in a broader Western pushback campaign.

Rosneft CEO Igor Sechin was included in the blacklist and will no longer be able to enter the U.S.

Much attention has been given to the avant-garde strategy and tactics Russia has used in the tug-of-war with the West over Ukraine’s future. “We are witnessing a new kind of war and a new kind of invasion,” opinion writer Anne Applebaum wrote in the Washington Post recently. She has in mind Moscow’s infiltration of special forces to foment secession in Eastern Ukraine, its funding and arming of local paramilitary groups and criminal elements, and the Kremlin’s invention of a self-serving, slick media narrative that aims to provide a rationale for Russian meddling and boost Putin’s domestic support. But Applebaum might also have mentioned the West’s use of economic sanctions to push back against Moscow’s interference as an element in this “new kind of war.” The taking of such actions is unprecedented against a nuclear power which many European Union members still regard—as do some officials in U.S. President Barack Obama’s administration—as an important, if misbehaving, partner.

On April 28, the United States imposed a new round of “smart” sanctions against Russian government officials and companies considered close to Russian president Vladimir Putin, including travel bans and asset freezes for seven Russian officials and asset freezes on seventeen Russian companies. The targeted officials included Igor Sechin, president of Rosneft oil company and close Putin advisor; Vyacheslav Volodin, Putin’s deputy chief of staff; and Aleksei Pushkov, chairman of the Russian State Duma International Affairs Committee. The seventeen companies were linked to Russian oligarchs targeted in previous rounds of sanctions: Gennady Timchenko, Arkady and Boris Rotenberg, and Yuri Kovalchuk. Thirteen Russian companies will face additional restrictions since the U.S. government will cut off the export or re-export of American products to them. The State and Commerce Departments also announced a new policy of denying export license applications for high technology items that could contribute to Russia’s military capabilities.

The next day, on April 29, the European Union imposed a new round of its own sanctions on Russia over what it described as threats to Ukraine’s independence. The EU measures, generally milder than those of the U.S., included freezes on EU-based assets of ten Russian officials and five Ukrainians, all of whom it linked to the unrest in Eastern Ukraine. The officials were also banned from travel to the EU.

In contexts other than the Ukraine crisis, sanctions have had a mixed performance record. They have been more likely to succeed when they are multilateral, when they are aimed at a well-defined economic objective rather than a broad geopolitical agenda, and when the targeted economy is less developed and more vulnerable to a trade disruption. Using sanctions alone to move Russia out of Ukraine—including the limited measures announced on April 28—is thus unlikely to work without being included in a broader Western pushback campaign. Russia’s political and business class is vulnerable to sanctions, since they have significant financial stakes in the West—stakes in business, wealth, houses, and sports teams. But the oligarchs’ longstanding integration into the global economic system means that any action against them raises the threat of Russian retaliation.

The ability of the U.S. and its partners to use sanctions effectively is further undermined by the asymmetry of the crisis: in principle, the West has by far the preponderance of military, economic, and security power that it can bring to bear. But Russia is next door to Ukraine, can move more quickly, and places far greater importance on Ukraine’s status than does the West.

The White House sometimes seems divided about what to do. There are reports that some administration officials oppose a tough U.S. response because they somehow think this would jeopardize the bilateral relationship on other issues.

Several specific factors in the U.S.’s approach are likely to limit further the effectiveness of the sanctions in place so far. Above, all, it is unclear whether Washington’s objective is to force Russia out of Ukraine, end Putin’s rule entirely, or merely strike back at the Kremlin symbolically. Some Obama Administration officials have said the White House’s goal is to pressure key Putin associates into pushing the Russian president for a more conciliatory Ukraine. “The goal here is not to go after Mr. Putin personally,” said President Obama. “The goal is to change his calculus.” But other officials have indicated that the motive behind the choice of targets so far has been to send a message to Putin that any assets he might have could ultimately be affected. In any case, “We don’t expect there to be an immediate change in Russian policy,” said one U.S. official. “What we need to do is to steadily show the Russians that there are going to be much more severe economic pain” and isolation.

Despite sanctions’ promise as twenty-first-century international weapons, the Obama Administration has also allowed their potential effectiveness—limited though it may be—to be blunted by very traditional diplomatic and bureaucratic constraints.

First, although the White House has repeatedly expressed concern about Russian actions and spoken of “the red lines” that should not be crossed, its actions have only occasionally matched its tough words. By taking the threat of a North Atlantic Treaty Organization (NATO) military response off the table at the beginning of the crisis, for example, Obama has undercut the impact of the enhanced NATO presence in Ukraine’s neighboring states. U.S. officials say “sectoral” sanctions against Russian banks and its energy industry are being held in reserve as a deterrent against a Russian invasion of Ukraine, or Moscow’s sabotaging of the May 25 Ukrainian presidential elections, but that makes it seem that the U.S. is giving Russia a “pass” on its annexation of Crimea and its campaign to create chaos in Ukraine’s east and south.

Indeed, the White House sometimes seems divided about what to do. There are reports that some administration officials oppose a tough U.S. response because they somehow think this would jeopardize the bilateral relationship on other issues and/or that the Crimea invasion was an “anomaly.” The business community and those in the government who speak for it have been lobbying Obama hard against a tough response.

Second, the White House seems to view the Ukraine events as a distraction, rather than an existential threat to the existing European security infrastructure. Instead of formulating a strategy to stabilize Ukraine, Obama (and EU leaders) have participated in a Russian-orchestrated game to “de-escalate” tensions in which they have pretended that Russia is a partner that shares the same objectives. This approach has repeatedly ceded the initiative to Putin.

Third, the White House’s preference for working in concert with Europe has slowed down and narrowed the Western response. While Obama has correctly calculated that a united front would increase any sanctions’ effectiveness, deferring to the U.S.’s European allies also reinforces—and justifies—Obama’s own caution. Administration sources, according to media reports in the run-up to the latest round of sanctions, said the wealthy, Kremlin-connected VEB bank, the head of Gazprom, and Gazprom Bank would all be on the April 28 list (these are targets that would substantially increase the vulnerability of the U.S.’s European partners who are dependent on Russian energy imports). In the end, they were not included, presumably due to European opposition.

U.S. officials have pointed to the fall of the ruble in recent months, the decline of the Moscow stock market, and Russia’s slowing growth and increased chance of recession as evidence that the sanctions imposed so far have been a success. Western capital markets have been closing for Russian companies, and capital flight since the beginning of the year has been huge.

But some of these worrying signs were evident well before Obama began to impose sanctions. Russian stocks and bonds climbed this week and the ruble advanced after the latest round of sanctions was announced. The impact of the sanctions “looked to be on the light side” of what the markets expected, said one Moscow banker. “This was more of a reminder that a new phase of sanctions is possible.” Nor are there signs that the sanctions against the people close to Putin are causing them to reassess their loyalty to their boss. For now, most Russian elites seem confident they can weather the storm with the West by turning inward or toward China. The current troubles with the U.S., they likely have speculated, will soon pass, and the situation will return to normal in a few months, just as it did after the war with Georgia in 2008. Obama, Merkel, and the others, they also may calculate, will eventually accept the facts on the ground.

Subscribe for IMR's media roundups

Every Friday, we release a comprehensive digest of the most compelling articles related to Russia.

If you are interested in getting a rare insight into what Russia is really about; what the Russian government and the Russian people are really thinking; what the Russian expert community is really discussing; subscribe to our weekly newsletter below or by letting us know at info@imrussia.org.

Citation of material from this website is allowed without obtaining prior permission, provided that it includes a link to the original page. Link should be placed directly in the body of the text, immediately following or preceding the citation.

JavaScript is currently disabled.Please enable it for a better experience of Jumi.